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Edited Transcript of MMI earnings conference call or presentation 20-Feb-19 10:00pm GMT

Q4 2018 Marcus & Millichap Inc Earnings Call

Calabasas Feb 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Marcus & Millichap Inc earnings conference call or presentation Wednesday, February 20, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Evelyn Infurna

Marcus & Millichap, Inc. - MD, ICR Inc.

* Hessam Nadji

Marcus & Millichap, Inc. - President, CEO & Director

* Martin E. Louie

Marcus & Millichap, Inc. - Senior VP & CFO

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Conference Call Participants

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* Brendan Patrick Finn

Wells Fargo Securities, LLC, Research Division - Associate Analyst

* Corey R. DeVito

JMP Securities LLC, Research Division - Associate

* Mitchell Bradley Germain

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Stephen Hardy Sheldon

William Blair & Company L.L.C., Research Division - Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to Marcus & Millichap's Fourth Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Evelyn Infurna, Investor Relations. Please go ahead.

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Evelyn Infurna, Marcus & Millichap, Inc. - MD, ICR Inc. [2]

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Thank you. Good afternoon, and welcome to Marcus & Millichap's Fourth Quarter 2018 Earnings Conference Call. With us today are President and Chief Executive Officer, Hessam Nadji, and Chief Financial Officer, Marty Louie.

Before I turn over the call to management, please remember that our prepared remarks and responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors, including, but not limited to, general economic conditions and commercial real estate market conditions; the company's ability to retain and attract transactional professionals; the company's ability to retain its business philosophy and partnership culture amid competitive pressures; the company's ability to integrate new agents, sustain its growth and other factors as discussed in the company's public filings, including its annual report on Form 10-K, which will be filed with the Securities and Exchange Commission on March 1, 2019.

Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise. In addition, certain of the financial information presented on this call represents non-GAAP financial measures. The company's earnings release which was issued this afternoon and is available on the company's website, represents reconciliations to the appropriate GAAP measures and explanations of why the company believes such non-GAAP measures are useful to investors.

Finally, this conference call is being webcast. The webcast link is available on the Investor Relations section of our website, www.marcusmillichap.com, along with a slide presentation you may reference during the prepared remarks. With that, it's my pleasure to turn the call over to Hessam Nadji.

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [3]

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Thank you, Evelyn. On behalf of the entire Marcus & Millichap team, good afternoon, everyone, and thank you for joining our fourth quarter 2018 earnings call.

2018 marked our fifth year as a public company and we achieved a number of key milestones. A few highlights include record revenue and transaction volume, record net income, a salesforce of nearly 2,000 professionals, and 80 offices throughout the United States and Canada.

We also successfully initiated a capital deployment program for a strategic acquisition. These milestones are a reflection of our clients' trust in us and our 48-year commitment to creating value in every transaction. They are also the result of the hard work, collaboration and skills of the entire Marcus & Millichap team which we are very proud of. We view 2018 as just a point along the path toward realizing our long-term potential while creating value for our clients and shareholders.

For the year, we achieved revenue growth of 13.2% and net income growth of 18.1%, adjusting for a lower tax rate. This was supported by incremental growth throughout the year and boosted by higher than expected sales in the fourth quarter which resulted in revenue growth of 13.6%. The primary drivers of our results for the year were the internal initiatives deployed over the past 2 years. These include increasing client outreach, focus on growing inventory levels, and numerous educational campaigns to help investors navigate changing market conditions. Our intensified marketing campaign resulted in record investor touches, opinions of value and listings. Just as an example, our Tax Reform and Opportunity Zone webcast alone attracted over 20,000 investors throughout 2018, illustrating the company's vast market reach.

We also believe our investments in proprietary technology and brokered support were pivotal in facilitating more transactions and achieving higher growth rate. In fact, last year our growth rate sales volume increased 18.4% in contrast to an estimated 6% to 8% sales volume increase in the broader market. We believe this points to overall share gains.

Beyond contributions to 2018, our platform investments are essential in positioning the company for long-term growth and competitiveness. In 2018 we added 158 professionals to our sales and financing team for growth of 8.7%. We also implemented key strategies to expand and improve our financing division, MMMC, which had revenue growth of 16.4%. Additionally, our efforts to balance expense controls while making key investments in the Marcus & Millichap platform, coupled with healthy revenue growth, resulted in an expense leveraging for the quarter and the year.

And lastly, we completed 4 acquisitions as we embark on the path of supplementing our traditional organic growth. Although they were small in relative size, every one of these groups is enhancing our client services and market coverage. Most of these acquisitions are currently in their ramp up stage and I'm happy to report that all of the professionals added to the MMI team are integrating well. We are starting to see the mutual benefits of synergies, efficiencies and business opportunities created from coming together. It's also clear that the care we have taken to be selective and ensure cultural and personality fit is proving to be effective so far.

From a market perspective, 2018 brought a mixed bag of positives and headwinds. On the positive side, steady job growth, solid real estate fundamentals and strong loan performance were and continue to be the essential elements of a healthy real estate market environment. Early last year, investors applauded the real estate friendly tax law changes, although specifics of certain provisions and the market's absorption of real estate investment benefits have been gradual. As we noted throughout the year, a persistent bid-ask spread has been a market theme for some time. This was further exacerbated by the aggressive messaging by the Federal Reserve and rising interest rates through October.

As for the fourth quarter, trade tensions, economic concerns and a shift in the Fed's messaging to a more [duller] stance reduced future rate hike expectation. The Fed's repositioning, combined with the stock market volatility that we observed, helped reverse the rising tide of long-term interest rates midway through the quarter as investors sought safety.

For our business, we believe these dynamics helped improve real estate investor sentiment with many clients citing the drop in interest rates as an unexpected window of opportunity. This formed a bit of a relief rally and helped increase our closings late in the year. Activity has since settled into a more steady pace so far in 2019 and our team is replenishing pipelines in the aftermath of Q4's record transaction closing pace.

Looking at our business composition, I'm happy to report that we achieved growth across all investment market segments. The stalwart of our platform, our private client market segment, saw brokerage revenue growth of 15.5% in the quarter and roughly 9% for the year. This important segment represents approximately 65% of our brokerage revenue. As in past years, the segment accounted for an estimated 84% of all commercial property sales in the marketplace last year.

Our middle market brokerage revenue grew 14% in the quarter and 28% for the year, while our larger transaction brokerage revenue increased 41% in the quarter and 35% for the year. Growth of these segments point to our expanding ability to help private clients buy and sell higher priced assets as their portfolios grow and change. It also aligns with the maturing of many of our brokers who are becoming more skilled and competitive in executing larger transactions.

Lastly, we continue to see growth in larger transactions stemming from our strategy to service institutional clients through our IPA Division. It is important to note that these business segments are more variable and can be skewed from quarter to quarter. This highlights the importance of viewing our business over the long term.

Our results last year were also supported by strength in the apartment sector which saw a rebound in the pace of rent growth. This was driven by more jobs, increased household formation, and consumers' preference for renting versus buying. Our hospitality, self-storage, seniors housing, office and industrial divisions all posted healthy growth for the year. We continue to see challenges in various aspects of the retail business which has been the subject of overly negative and in some ways unjustified media coverage. We are actively working with many clients who see contrarian opportunities within retail. Many of our clients are also taking advantage of 1031 tax deferred exchange opportunities coming out of apartments and going into single tenant retail. This is just one example of the advantage of our platform for investors and our own brokers.

MMCC experienced a boost in refinancing activity during the fourth quarter as many investors moved to take advantage of lower interest rates. Our strategic growth plan for this vital area of the company consists of major technology initiatives, further expanding our lender programs, and enhancing our service offering. More specifically, we are strengthening our agency lending for multifamily, life insurance correspondence programs and CMBS lending. Hiring experienced professionals, improving our financing support systems and efficiencies for our loan originators also remained top priorities.

Looking forward, we expect continuation of job growth, but most likely at a slower pace, a healthy supply/demand balance in virtually all property types, and stable interest rates in the short term. We continue to see a gap between buyer and seller price expectations which vary by property size and location. This will continue to require more time and energy to bring buyers and sellers together with marketing timelines likely to remain elevated. As I've mentioned on previous calls, there is no shortage of buyers for appropriately priced assets once valuations are adjusted to market reality. This is still the case.

For us, our strategy is to drive market share by maximizing investor outreach, further growing inventory and helping our clients navigate the market once again. Beyond any given year's trend, we are focused on the long-term health and growth of the company. To this point, we believe our strong capital position will be a major advantage as we look to build on our recent success in acquiring complementary firms.

We are excited to have just announced our first acquisition for 2019 which beings a major brokerage group to MMI in Edmonton, Canada. This group's deep client relationships and experience will be the catalysts for further expansion and growth for us in western Canada while bringing synergies cross border to many US markets.

Acquisitions remain our top priority as related to our capital deployment strategy. We are increasingly encouraged by more reasonable valuation expectations and growing interest in MMI among target firms. We're in active discussions with additional select targets and scaling our acquisition capacity going into the new year. We recognize the expansion of our cash position and believe that our strength in balance sheet supports the firm extremely well, offensively and defensively, while at the same time giving us optionality for executing larger acquisitions.

I will now turn the call over to Marty to discuss our results in more detail. Marty?

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Martin E. Louie, Marcus & Millichap, Inc. - Senior VP & CFO [4]

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Thanks, Hessam. I'll be discussing our fourth quarter 2018 and full year results in greater detail. Total revenues in the fourth quarter increased 13.6% year-over-year to $230 million, due to strong performance across the board. Revenue from our real estate brokerage business, which accounted for 92% of our total revenues, grew by 19% to $211 million due to meaningful contribution across all market segments.

Revenues from our Private Client business, which accounted for approximately 63% of our real estate brokerage commission revenue grew 15.5% to $134 million. Revenue in our middle market segment grew by 14% for a fifth consecutive quarter of growth. Lastly, revenue from our larger transactions were up 41% year-over-year. This was largely due to a number of $20 million plus transactions for which we obtained higher than usual fees and some performance related fee premiums collected in the quarter.

For 2018, total revenues grew 13.2% to $815 million driven by our real estate brokerage commissions and financing fees which were partially offset by decline in other revenues. We saw strong topline improvement across all market segments during the year with revenues in the Private Client market segment growing 9% and revenues in the middle and large transaction markets growing 28% and 35%, respectively. During the fourth quarter, we executed 2,603 transactions, a 6.5% improvement from the prior year. For all of 2018, the total number of transactions executed by our professionals increased 5.5% to a record 9,472.

Total sales volume for the quarter increased nearly 8% year-over-year to $13.2 billion and nearly 10% to $46.4 billion for the full year. Brokerage transactions and volume during the quarter increased year-over-year 10.3% and nearly 14% respectively.

Moving onto MMCC results, revenue from financing fees increased 6.8% to $16.6 million for the quarter driven primarily by growth in refinancing. For 2018, MMCC grew revenues by 16.4% to $57.8 million. MMCC's strong performance was a result of growth in the number of financing professionals, the broadening of our lender relationships, and an increase in our average transaction size.

Other revenues, which is comprised primarily of consulting and advisory fees, along with referral fees from other real estate brokers, was $2.5 million in the fourth quarter and $9.6 million for the year. The declines were due to the second and fourth quarter of last year benefiting from large consulting and advisory fees. As a reminder, these assignments are an extension of our brokerage business and client relationships and can be highly variable.

Total operating expenses for the fourth quarter were $198 million, up 12.8% year-over-year. The increase in the fourth quarter was primarily due to higher cost of services and SG&A. Cost of services grew 12.7% year-over-year to $149 million as a result of higher sales. As a percent of total revenues, cost of services fell by 50 basis points to 64.5%. This reflects an increase in the proportion of transactions closed by our less senior investment professionals who are generally compensated at lower commission rates.

SG&A was up 12.5% year-over-year to $48 million. This was due to higher compensation related costs including stock-based compensation, expansion of existing offices, higher investments in our brokerage support, business development initiatives, and professional fees. On a full year basis, total operating expenses which include cost of services, SG&A, depreciation and amortization growth, grew by 12.7% to $703 million reflecting our focus on managing costs and leveraging expenses. For the fourth quarter of 2018, net income was $26.2 million or $0.66 per diluted share compared to net income of $8.5 million or $0.22 per diluted share for the same period last year. When adjusting for the impact of the new tax law, the increase in net income would be 16.8%.

For the year, net income increased by 69% to $87.3 million or $2.22 per diluted share compared to $51.5 million or $1.32 per diluted share in 2017. When adjusting for the new tax law, net income increased 18.1%.

Adjusted EBITDA during the quarter increased by 12.5% to $36.1 million for a margin of 15.7%. As we have discussed in the past, some variability can be expected in our adjusted EBITDA margin from quarter to quarter, but over the long run, we expect to see margin expand. For the full year, adjusted EBITDA was $129.5 million, for a year-over-year growth of 15.9%. Our adjusted EBITDA margin expanded 40 basis points to 15.9% due to strong topline growth and expense leveraging.

Moving to the balance sheet, we finished the year strong with liquidity levels of approximately $400 million. Our capital deployment priority continues to be accretive and strategic acquisitions. During the fourth quarter, the company made 2 such acquisitions, the first of which closed in October, 2018. This was a regional Canadian brokerage firm, PrimeCorp Commercial Realty, Inc. The second, which closed in December, was a seasoned, highly regarded Seattle-based institutional broker. This brings us to a total of 4 acquisitions since June of 2018. These acquisitions are accretive and have expanded our footprint and services to both our private and institutional clients.

Before opening the call for questions, I would like to point out a number of key items and highlights which may have an impact on our 2019 results. First, each quarter of 2018 showed double digit revenue growth. As a result, 2018 will be a challenging comparable, especially for Q1 of 2019 since our brokerage revenues grew 16% in the first quarter of last year. Given the strength of Q4 2018, we are currently replenishing our inventory and pipeline.

Second, cost of services in the first quarter of 2018 were historically low at 58.2% of revenue. Going forward, we expect cost of services for each quarter to be in line with our historical averages. Third, the middle and large transaction markets played a major role in our 2018 results as they accounted for nearly 31% of our investment sales revenue versus 27% in 2017. As a reminder, activity in these segments can be variable. Fourth, we anticipate SG&A expense leverage in 2019. The cadence of SG&A should be similar throughout the year. Also note that during the first quarter of each year, our expenses increase due to award recognition programs for our brokers to acknowledge their previous year's achievements. As such, we expect first quarter's SG&A to be approximately 5% to 7% higher than the first quarter of 2018.

Lastly, we expect our tax rate to be approximately 26% to 27%. It is important to note that we will not experience an extraordinarily large tax windfall benefit in the fourth quarter of 2019 as we have in the past 2 years. As a reminder, 2018 was the last year of settlement for the majority of our deferred stock units issued in connection with the company's IPO. Therefore, the tax rate in the fourth quarter of 2019 should be similar to the first 3 quarters of the year.

I would like to now open up the call for Q&A. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Stephen Sheldon with William Blair.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [2]

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I guess first, just based on the commentary for 2019, especially on currently replenishing the pipeline, is it fair to think that there was some potential pull forward of activity maybe out of the first quarter 2019 into the fourth quarter?

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [3]

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Stephen, this is Hessam. I'll take your question. There was a little bit of that, but not material enough as a growth driver of our Q4 results. We just saw tremendous strength, as I explained in my comments, in the latter part of the year as interest rates came down and so forth. Because we closed a significant amount of our pipeline and the fourth quarter was so active, naturally it just takes time to basically replenish inventory levels and rebuild the momentum. So pull forwards were somewhat of a factor, but not a major impact.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [4]

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Then just in thinking about the 2018 brokerage revenue growth, it seems like roughly 1/3 of your topline growth was from recruiting and roughly 2/3 was driven by productivity gains. I guess as you're thinking about 2019, can you maybe share your thoughts on the expected pace of recruiting and whether there is an opportunity for productivity to continue for new hire after the really strong performance this year?

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [5]

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Sure. You know it's very hard to try to quantify a forecast on that because any year is configured based on the type of talent that you can bring on that particular year. And our discussions with people sometimes take anywhere from 12 to 18 months before they result in an actual change in company for the experienced folks that we hire and the ramp up of the newer folks that we hire. So it's very difficult to tell you in a quantified fashion what those ratios will be in 2019. But just know that we're constantly recruiting, training and developing new professionals. We've had an emphasis for the past 3 years on increasing our focus on bringing in more experienced professionals, which has been successful. And of course, with the technology investment, the brokerage support focus, infrastructure improvements, productivity is a very, very critical aspect of everything that we do. It just makes it easier for our team to do business, spend less time on administrative activities and more time with clients. So all of it is a major focus. I don't know if I can really quantify a forecast for how much of the growth will come from each of those pieces. All of them are very important to us in 2019 and beyond.

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Martin E. Louie, Marcus & Millichap, Inc. - Senior VP & CFO [6]

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Stephen, this is Marty. Let me just add to that that we continue to strive towards our 100 net agent growth for 2019. Not going to be any different.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [7]

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Okay, got it. That's very helpful. Then just within the larger transaction market, really strong performance there again this quarter. Composition was a little different in terms of mid-single digit growth in dollar volume, significant increase in the commission rate. I think you briefly mentioned it, but can you walk through again what drove the commission rate there higher this quarter? And would you expect that to revert back to more normal levels looking forward? I think it's typically been less than 1%.

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [8]

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Yes, we definitely would expect it to revert to normal fee percentages. We had a number of situations where we helped clients out of some specific assets that were higher in value where we were able to earn larger than usual fee percentages. And as Marty mentioned in his comments, there was also some performance related fees that really increased the overall fees for the $20 million plus larger segment. So going forward, it's always best to assume normal activity and normal fee ranges as you do your forecast for 2019 and beyond.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [9]

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Great. Congrats on the solid end of the year.

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Operator [10]

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Our next question comes from the line of Brendan Finn with Wells Fargo.

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Brendan Patrick Finn, Wells Fargo Securities, LLC, Research Division - Associate Analyst [11]

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I guess, Hessam, in your prepared remarks you talked about a more favorable acquisition environment than in previous quarters. And since you guys have closed several acquisitions recently, I guess are you looking to do acquisitions of a similar size in 2019? And then are there markets that you're looking to acquire in?

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [12]

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Brendan, yes, there are obviously numerous markets where we have either a service gap or a property type coverage gap that we can acquire into. A lot of that has to do with expansion of our financing division. But a lot of it has to do also with just bringing in brokerage teams that are value add to what we're doing in a particular office. So we definitely have a geography driven acquisition plan, but we also have kind of opened our minds to the fact that the size of the target isn't something we can dictate if you will. We know there are a number of larger firms that would be very synergistic with our model. It would be good for them and good for us, we're in discussions with a couple such targets. But from the standpoint of the business, the acquisitions that we executed were very much a ground up, locally driven, relationship driven set of deals that we did. Which in our minds are the best type because there is culture similarities, there is some existing relationships that helps with the integration and so forth. So obviously we would like very much to scale our acquisition targeting and we're actively doing that. But it all has to do with the quality of the target and the fact that there is a really good business and cultural fit. We are not going to force acquisitions because of some esoteric goal. We're very sensitive to that. So I hope that answers your question.

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Brendan Patrick Finn, Wells Fargo Securities, LLC, Research Division - Associate Analyst [13]

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Yes, that's definitely helpful. And then you guys have also talked about expanding your market share in some of your nontraditional asset classes like I guess senior housing, your self-storage or industrial. So are there any certain asset classes that you guys are focused on for expanding your market share in 2019?

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [14]

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Absolutely. If you look at the composition of our business by property type over the past 5 years since we became public, you would notice that our multifamily share of our own business has basically gone from about 40% to 35%. That's at a time where the business actually grew, but the share declined because in the other categories, being office, industrial, self-storage, hospitality and so on, the share went from 20% to 25%. So our efforts to diversify the specialization of the company is happening as we speak and it will be a major focus going forward. The beauty of our model is that we have growth opportunity in virtually every property type including apartment where we're by far the dominant broker including retail. We are by far the dominant broker by transaction count and virtually every one of those property types still offer a lot of growth opportunity for us in a lot of markets. So it's -- I get the question a lot about what would you like the business composition to be X years from now? Obviously, we want to diversify as much as possible, but we really look at it as growth opportunity. Where there is growth opportunity, in every property type, we're out there pursuing it. Office industrial is particularly important to us because of the synergies that I think those markets will bring to our client base. And if you look at the linkages between our apartment investors doing 1031 Exchanges into single tenant retail or now looking at self-storage or looking at student housing, those cross border, cross product type flows of capital are very important for us and the value that we create for clients. So diversity is very important.

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Operator [15]

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(Operator Instructions). Our next question comes from the line of Corey DeVito with JMP Securities.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [16]

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Guys, it's Mitch here with Corey. It's actually Mitch here with Corey. You previously talked a little bit about the pipelines and how they 4Q saw a bit of an uptick as the quarter proceeded, then the rates moved lower. But I'm curious if there were a lot of deals that throughout the quarter were broken or postponed. And did that take some time away from the brokers from building the pipeline as you head into the quarter 1 or quarter 2 of 2019?

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [17]

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Sure. I will say that a lot of investors that have been on the sideline and not quite ready to pull the trigger, did move in and pull the trigger more than expected in Q4. There wasn't the broken deal syndrome that we have faced before, Mitch. As you may recall, in Q4 of 2016 when the interest rates had a movement in the other direction, interest rates went up about 70 basis points in just a matter of a few weeks, there was a lot of broken deals and repricing that was a major distraction. In the case of Q4 2018, it was a little bit of the reverse of that in that the lower rate and a lot of people kind of moving back in off the sidelines to take advantage of those lower rates, of course kept us busy, but kept us busy for a different reason. And that is we closed a lot more transactions than we had in prior Q4. So that said, that was a positive distraction if you will instead of a negative distraction. Now of course when you have an outsized quarter and sell a larger portion of the pipeline moving forward and inventory moving forward, it takes a little bit of time to replenish that. But all in a positive sense. Not from the sense of anything being broken.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [18]

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I wanted to talk about the cadence of SG&A, Marty, if we could. I get, I understand Q1 about 5% higher. How should I think about the quarters after that? I mean relatively kind of within band of what the Q1 levels are? Or do I see a dip into 2Q? Some years we saw it dip and some years we saw it grow, so I'm just trying to understand kind of how we should think about that line item as we look forward.

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Martin E. Louie, Marcus & Millichap, Inc. - Senior VP & CFO [19]

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Right, Mitch. Yes, you got it right. We mentioned that we see Q1 growing about 5% to 7% from Q1 of 2017. Going forward, and I think if you look at the previous years, that the cadence of SG&A is typically around Q1, Q1's level. You're right, it may go up and down a million dollars or so, but it's right around there.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [20]

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Got you. I think Corey had a quick question as well. Go ahead, Corey.

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Corey R. DeVito, JMP Securities LLC, Research Division - Associate [21]

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Yes. I was just wondering if you guys could quantify what the windfall tax benefit recognized in the fourth quarter was? I know on the last call you guys said it was going to be around $0.03 to $0.04.

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Martin E. Louie, Marcus & Millichap, Inc. - Senior VP & CFO [22]

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Right. It was around $1.8 million.

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Corey R. DeVito, JMP Securities LLC, Research Division - Associate [23]

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Okay. And then for 2019, what could we expect the normalized tax rate to be?

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Martin E. Louie, Marcus & Millichap, Inc. - Senior VP & CFO [24]

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It will be -- we believe it's going to be between 26% and 27%. And you won't -- so pretty much, tax rates should be very similar from quarter to quarter.

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Operator [25]

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Ladies and gentlemen, we have reached the end of the question and answer session and I would like to turn the call back to Hessam Nadji for closing remarks.

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Hessam Nadji, Marcus & Millichap, Inc. - President, CEO & Director [26]

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Thank you, operator. And thank you, everybody, for joining our fourth quarter 2018 earnings call. We look forward to our next earnings call and seeing some of you on the road as we travel the country. Thank you very much.

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Operator [27]

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This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.